Good News for Millions of Americans: Federal Ban on Noncompete Agreements May Improve Your Rights as an Employee.

For many years it felt like employers had the upper hand over their dedicated workers. Corporate executives and senior managers seemingly held all the cards – setting salaries, establishing work rules, deciding upon benefit options, hiring and firing staff members at will, even forcing employees to sign what many considered to be onerous noncompete agreements.

But then along came trade unions, which gave many employees a stronger position when it came to negotiating for better pay, gaining fringe benefits like improved health insurance and more vacation time, and having stronger representation in legal situations such as unfair termination and anti-discrimination lawsuits among others. And this spring the Federal Trade Commission – which helps regulate employment rules and seeks to limit unfair competition – has given workers something else to cheer about by effectively eliminating U.S. employers’ ability to require workers to sign noncompete agreements. Let’s take a few minutes to discuss what this recent move likely means for the nearly 30 million currently affected employees across America, not to mention anyone who joins the workforce in future years.

Exactly What Did the FTC Do for Workers’ Rights?

On April 23rd, the FTC dealt a blow to coercive employment practices by preventing companies from requiring workers, including independent contractors or freelancers, to enter into new noncompete agreements. It also moved to stop employers from enforcing most non-compete agreements that were already in force. In other words, if you had been required by your employer to sign a noncompete agreement as a condition of your employment, that agreement will most likely be rendered null and void by the FTC’s ruling, which is set to take effect September 4th. (Here is the full 165-page document outlining the commission’s ruling in case you need some cheerful bedtime reading!) There are a few exceptions, though, which we’ll get to in a moment.

What is a Noncompete Agreement Anyway?

Basically, noncompete agreements are contractual arrangements that have been used to stop workers from leaving their employers and taking their valuable skills and knowledge to competitors. By penalizing workers with the threat of legal action if they decide to take a job offer in the same industry with another employer, noncompete agreements effectively limited workers’ opportunities for career advancement and higher pay. The FTC has determined that this type of restriction constitutes a form of unfair competition, and has taken this step to ban noncompete agreements as a result.

What are the Possible Outcomes of this Change?

While this is certainly good news for employees, since it eliminates barriers to working at competitive companies and opens doors to opportunities that had previously been closed, there are already legal challenges being made which will attempt to prevent the FTC from implementing the new rule, and it remains to be seen if these efforts will be successful in court. Of course, this fall’s elections may also impact the FTC ruling. If, for example, Republicans regain the presidency and control of Congress, it’s possible this ruling will be changed, postponed, or even completely set aside or canceled. Two months before the rule was approved, some GOP members of the House of Representatives had already registered their opposition to the FTC’s proposal. (It’s also important to know that the ruling was adopted by the FTC’s commissioners in a very close 3-2 vote – and with two of the commissioners’ terms ending in 2025, the possibility of newly appointed members changing the outcome of future decisions on this issue or perhaps reversing the April decision certainly exists.)

Are there Any Exceptions to the FTC’s Noncompete Agreement Ban?

Yes, but only a very few. If you’re a “senior executive” (defined as a worker in a “policymaking” role earning more than $151,164 annually) who already has a noncompete agreement in place, your existing agreement is effectively grandfathered in under the FTC ruling. However, any new noncompete agreements for senior executives will not be permitted after September 4th, and any currently existing noncompete agreements for all other workers will automatically be invalidated once the new rule goes into effect. One thing to know, though, is that employers will still be allowed to require workers to sign non-disclosure agreements to protect their valuable proprietary trade secrets from being revealed to competitors by former employees.

What Happens if an Employer Breaks the New Rules After September 4th?

If you believe your employer (or a prospective employer) is attempting to skirt the rules by forcing you to sign a noncompete agreement after September 4th, you can report the suspected violation by emailing your complaint to noncompete@ftc.gov. Otherwise, the best advice we can offer anyone in this situation is to seek legal advice right away. While our firm specializes in personal injury law to help Michigan residents who’ve been hurt through no fault of their own, we can certainly refer you to other qualified attorneys who regularly deal with labor law issues, or recommend additional legal resources that may be able to assist you in this type of circumstance. Of course, if you or someone you love are ever injuredin a car crash, on the job, aboard a boat, on a bike, or just about in any way, we always stand ready to help you be compensated for your pain and suffering and get reimbursed for other damages without costing you one red cent out of pocket. To get in touch, just call us at 855-MIKE-WINS (855-645-3946) anytime.

Content checked by Mike Morse, personal injury attorney with Mike Morse Injury Law Firm. Mike Morse is the founder of Mike Morse Law Firm, the largest personal injury law firm in Michigan. Since being founded in 1995, Mike Morse Law Firm has grown to over 200 employees, served 40,000 clients, and collected more than $1.5 billion for victims of auto, truck and motorcycle accidents. The main office is in Southfield, MI but you can also find us in Detroit, Sterling Heights and many other locations.